The latest economic data from the eurozone suggest that recovery may finally be at hand. But a more robust and sustained upturn in job creation and income growth still faces a broad array of daunting challenges.
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The risks posed by larger public deficits have focused attention on “potential output growth,” a concept originally created by economists for economists. The concept's imprecision and volatility have weakened the EU’s fiscal pact, and Europe's leaders need to reconsider their approach.
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While rapid economic growth, such as that realized over the past 50 years, is critical to support development, we now also know that it can have serious adverse consequences, particularly for the environment. How can we balance the imperatives of growth and development with the need to ensure sustainability?
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China is generating a lot of confusion nowadays, both at home, where officials now tout the economy’s “new normal” but are unclear about what it is, and abroad, where the US is embracing “containment” of China’s rise. On both counts, the disconnects are striking, adding a new dimension of risk to a fragile world.
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The inadequate response to the Great Recession reflects policymakers' acceptance of Milton Friedman's analysis of the Great Depression. And yet the dominance of Friedman's monetarism has less to do with the evidence supporting it than with the fact that economics is all too often tainted by politics.
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